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Where Taxpayers and Advisers Meet

UK-UK company purchase, shipping to EU, import charges

scott_itconsultant
Posts:2
Joined:Sat Mar 27, 2021 10:19 am
UK-UK company purchase, shipping to EU, import charges

Postby scott_itconsultant » Sat Mar 27, 2021 10:46 am

I've searched the forum for an answer, and I've not seen this question asked before. Hope someone can advise.

Company A in UK sells refurbished computers. Company B (my company) is also based in UK. Both companies have permanent UK addresses and are VAT registered. Neither company has any registration in EU.

I am the director of company B, and need to buy and ship a computer (£5000) from A to my address of residence in EU. The computer is for to be used for business purposes, and is not for resale.

Company A provides 2 choices how to make the sale. My normal preference is choice 1 (business to business)

1) Sell business-to-business, from company A to company B. Company A will arrange shipping to destination in EU using UPS. As a private person in EU, I will need to pay import charges when collecting parcel (approximately 20%, or £1000). My company will reclaim the VAT amount on UK VAT return later. Cost of purchase to company B= £5000-£1000VAT + £1000 import charges = £5000.

2) Sell business-to-customer, from company A to me personally. Company A will arrange shipping to destination in EU using UPS. As a private person in EU, I will need to pay import charges when collecting parcel (approximately 20%, or £1000). I will pass this expense onto my company. Cost of purchase to company B= £4000+ £1000 import charges = £5000.


What I cannot understand is that this purchase only costs £4000 within the UK (no import charges) between UK based businesses. In particular, the computer is sold from A to B, and (in my opinion) what is happening is that UK company B is shipping its own asset (purchased from A) to an address in the EU for business purposes. The only reason the computer is leaving the UK, is that due to COVID travel restrictions, the director of company B cannot currently work in the UK.

Is there any scenario where import charges can be avoided, on the basis that the UK company is just shipping it's own property to an address in the EU?

I appreciate your comments.

Scott

Trevor S
Posts:108
Joined:Tue Jan 01, 2019 12:37 am

Re: UK-UK company purchase, shipping to EU, import charges

Postby Trevor S » Sun Mar 28, 2021 9:10 am

I'm assuming that the £5k is the VAT exclusive price - i.e. if company A sold it to someone in the UK, they would charge £6k (£5k + £1k UK VAT). A business customer receiving it in the UK would (usually) be entitled to reclaim the UK VAT, leaving the cost to them as £5k (not £4k).

If company A exports the computer outside the UK, they don't need to charge UK VAT - regardless of whether the purchaser is a business or consumer. Company A just charges £5k (plus any extra shipping costs) and the purchaser (as importer) will be liable to pay VAT and duties in the EU country that the computer arrives in.

This means that the VAT incurred is not UK VAT, so can't be reclaimed by company B on their UK VAT return - even if it is the company (rather than the individual) who is the customer. If company B is the customer, they might be able to reclaim it directly from the foreign tax authorities - see: https://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/vat-refunds_en#section_2. The ability to do this can vary between member states, and forms will often need to be completed in the foreign language. But if company B is successful in obtaining VAT recovery from the foreign tax authority, the only extra cost incurred would be any additional shipping costs and any foreign import duty.

It's possible that at some future stage, company B may want to move their computer back to the UK? If so, that would be regarded as an import, and UK import VAT/duties would be incurred. However this VAT (but not duty) would be recoverable via the UK VAT return.

scott_itconsultant
Posts:2
Joined:Sat Mar 27, 2021 10:19 am

Re: UK-UK company purchase, shipping to EU, import charges

Postby scott_itconsultant » Wed Mar 31, 2021 6:55 pm

Thanks for your reply, that's a great help.


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